Companies & Sectors
Cost pressure on fertiliser companies to increase if natural gas is not made available to them
Fertiliser companies are staring at heavy losses if they are denied natural gas from Reliance Industries. RIL is producing 40 million metric cubic metres per day (MMCMD) of natural gas. Anil Ambani has also made a claim of 28 MMCMD per day. NTPC has also claimed 12 MMCMD to run its 4,000 MW power project. That will leave fertiliser companies with no input from Reliance Industries.
Fertiliser companies having annual capacity of 7.5 million tonnes based on natural gas could be hit by a major crisis if they are not given natural gas, which is used as a fuel and raw material. On an average, about 950 to 1,000 cubic metres of gas is used for each tonne of fertiliser. Around 20% of natural gas is used as feedstock and 80% is used as a fuel. 
In fact, the Government of India, in its policy decision, insists that fertiliser industry is the first priority for natural gas industry. According to Rashtriya Chemicals & Fertilisers (RCF), Mumbai, public sector fertiliser companies use 20 MMCMD of natural gas. On the question of what impact would be there if RCF is not given any gas allotment, RCF CEO, US Jha, refused to make any comment as this matter will be discussed in the Supreme Court.
Already eight fertiliser units are closed in Barauni, Sindri, Haldia, Gorakhpur, Talchar, Ramgundm, Korba and Durgapur. If gas is not made available to fertiliser companies, more units may see closure and that may in turn see sharp rise in fertiliser subsidies. Fertiliser subsidies were around Rs 46,000 crore in 2007-08 and are likely to cross Rs 1,00,000 crore this year.
In addition to natural gas, fertilisers can be made from heavy oil and coal. Heavy oil and coal options are very expensive as compared to natural gas. Heavy oil conversion to fertiliser plant will consume 30% more energy and coal conversion to fertiliser plant will consume 70% more energy. Investment cost in heavy oil and coal plants are also very expensive. Heavy oil plant is 40% more expensive and coal based plant is 140% more costly. Production cost as compared to the cost of natural gas is also very high. Heavy oil plant production cost of fertiliser is 20% more and for coal it is 70% .  So if natural gas is not made available to fertiliser plants, cost pressure on other options will create huge losses to the country.  


Stocks gain on PM’s reforms talk

Bank shares surge on assurance that the government’s stimulus measures would continue into the next fiscal

The Indian stock market gained for the fourth consecutive session on Monday, on the back of strong global cues and prime minister Manmohan Singh’s assurance on Sunday that financial reforms would be accelerated and the government’s economic stimulus measures would continue into the next fiscal year. The Sensex closed at 16,499, gaining 340 points, while the Nifty rose 102 points to 4,898.
Banking stocks were among the top gainers on Monday as the prime minister asserted that growth in the next fiscal year, assuming a normal monsoon season, was expected to be more than 7.0% compared with a 6.5% forecast for the current year. State Bank of India (SBI) rose 5%. Bank of Baroda (BoB) and Punjab National Bank (PNB) were up 3% and 2%, respectively, on news that they have entered into an agreement with T Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company.

Sensex heavyweight Reliance Industries (RIL) was up 3% on reports that the firm is planning to acquire some of the assets of US petrochemical major LyondellBasell, which is undergoing reorganisation under the protection of a US court.

Telecom stocks fell on worries that the ongoing price war would result in a sharp fall in revenues and profits. Reliance Communications was down 2% while Bharti Airtel declined 4% after chairman Sunil Mittal told the media that the company was not actively seeking acquisitions, after talks for a tie-up with South Africa’s MTN collapsed recently.

On Sunday, the prime minister had stated that the government would push through legislative changes in the insurance sector to attract more foreign investment. He added that the government would push through stake sales in profitable state-run firms, implement measures to deepen the corporate bond market, strengthen the insurance and pensions sectors and improve the futures market for better price discovery and regulation.

By December 2009, the government plans to introduce bills proposing to raise the foreign stake limit in insurance companies to 49% from the present 26% and to open up the pension sector to private and foreign firms. It will also propose a law to cut its holding in top lender State Bank of India to 51%. 

The timing of the withdrawal of the economic stimulus measures would be decided when it becomes clear the economy is recovering, but there will be no fresh stimulus, finance minister Pranab Mukherjee said on Sunday.

Asian markets ended in the green on Monday on strong global cues. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.28%-2.25%. Praising China’s economic performance in the past year during the global financial crisis, Moody’s Investors Service raised the outlook on China’s A1 rating to positive from stable. The agency said the country’s strong credit fundamentals would resume its improving trend as the economy emerged from the effects of the global recession.
— Swapnil Suvarna [email protected]


Piramal Life Sciences delays first drug discovery expectations
Dr Swati Piramal, director of Piramal Life Sciences, has been quoted in the media as saying that Piramal expects to launch its first drug by 2011-12. She further said that “the company would not hazard a guess on when it can break even because even after launch drugs can fail.” That gives a sense that the entire money spent on this drug could be wasted.
Dr Piramal’s statement substantially differs from what Ajay Piramal had said two years back in July 2007 in a national business magazine. Mr Piramal had said that the company expects a new molecule discovery in 2010-11. A delay in drug research is very common. Many pharma companies spend huge amounts on drug research and show impressive clinical advancement in phase I, phase II and phase III studies but then fail at the final stage.
Piramal Life Sciences has apparently already spent Rs600 crore on drug research and plans to spend another Rs200 crore in the next two years. The published report says that one molecule (a head and neck cancer drug) and four phythopharma molecules are at the phase II trial stage. That means that these are yet to enter into phase III trials on large number of patients before they turn out to be a success or failure. It’s going to be a long while before Piramal Life Sciences is able to declare any signficiant success on its drug research.
– Dhruv Rathi [email protected]


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